Week 9 Tutorial – Preferences and Utility

The utility function is typically used to represent the consumer's preferences mathematically and is
used to derive the shape of the indifference curves. Indifference curves are an important tool in
microeconomics for analysing consumer preferences and behaviour.

The following are some of the properties of the indifference curves:

1. Indifference curves are convex to the origin: This reflects the principle of diminishing
marginal rate of substitution, which means that as the consumer consumes more of one
good, the marginal utility derived from each additional unit of that good decreases.
2. Indifference curves do not intersect: This is because if two different points on an indifference
curve represented the same level of utility, then the consumer would be indifferent between
them, and therefore would not prefer one over the other.
3. Higher indifference curves represent higher levels of utility: This means that the consumer
prefers combinations of goods on higher indifference curves over those on lower
indifference curves.
4. Indifference curves cannot be thick: This means that indifference curves must be drawn as
continuous curves, without any gaps or breaks, because a consumer must have a consistent
level of preference for all possible combinations of goods.

Question 1: Which properties must be satisfied by the preferences to be represented by a utility

function?

Question 2: What are the desirable properties of the preferences and what are the implications of
these properties for the indifference curves?